R&D tax credits are a means of encouraging companies to innovate through a financial reward for developing new technologies to substantially improve products, processes, devices, materials and/or services.

Companies which are eligible for the tax incentives are extremely diverse. We have prepared claims not just for high technology companies in software, bio-medical, construction, aerospace etc. but also more ‘traditional’ manufacturing and engineering companies.
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Who can claim?

All companies, large and small, can claim if they undertake qualifying work – even if they do not pay corporation tax because they are unprofitable.

There are two schemes under which a claim can be made:
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Small and medium-sized businesses (SMEs)

For R&D intensive loss-making companies the cash payment which can be claimed from HMRC is circa 27% of qualifying expenditure.

A company can generally claim under this scheme where they have:

• less than 500 staff; and either
• less than €100 million turnover; or
• €86 million gross assets.
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If a company meets the above criteria but their R&D is either funded (for example, by grants) or subcontracted to them by third parties, they will most likely need to make a claim under the R&D Expenditure Credits scheme (see below).

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Research and Development Expenditure Credits (RDEC) scheme

RDEC allows larger companies, and SMEs in certain circumstances, to claim a cash credit against the cost of their qualifying R&D activity.

The credit is recognised in pre-tax profits in the company’s financial statements.

From 1 April 2023, the credit rate increased to 20% (from 13%). As with the small scheme, loss-makers are able to claim cash back from HMRC, subject to certain conditions being met.

The RDEC credit is itself subject to corporation tax, so the net ‘post-tax’ cash benefit that it generates is 15% of qualifying R&D expenditure (assuming a 25% tax rate).